Daimler Boss Plans to Put Mercedes Back On Top

The boss of the German automotive group, who expects to be reappointed for another five-year stint this month, Thursday stepped up a gear with his plan to get Mercedes-Benz back in pole position in the fiercely competitive global premium car market by 2020, having been overtaken by Volkswagen’s Audi and BMW in recent years.

The formula? Massive investment in new factories and products, with now 13 brand new Mercedes passenger cars in the works by the end of the decade. Combine that with a broad efficiency drive to get Daimler’s profit margins back in line with those at BMW, the world’s leading premium auto maker by sales.

Mr. Zetsche acknowledges operating profit won’t improve much this year. Blame a weak European economy for some of that, plus the time it’ll take Mercedes to get back on track in China where it’s only just finished reorganizing its business. These issues are likely to weigh on Daimler’s first-half performance, so even matching last year’s results will require a strong rebound in the second half.

But Mercedes is highly geared to growing car demand and extracting efficiency gains because its performance has been so poor. Mercedes sold a record number of cars in the fourth quarter yet its operating profit margin was just 5.3%, its thinnest since 2009, noted Max Warburton, an analyst at Sanford C. Bernstein. That’s around half of BMW’s automotive business.